Is Funeral Insurance Sufficient Cover?
April 4, 2016
Is funeral insurance sufficient cover? This is a question that has perplexed South African families for ages when looking at their future security with regard to income.
Should I go for life insurance or funeral cover, or do I need both?
On the surface the two products may appear to be the same thing: you contribute a monthly premium and receive a lump sum when death occurs.
So what is the point of signing up for the two, you ask? It is important to understand that the two products were designed to address different needs.
There are a number of points to consider and compare –
Many Funeral insurance plans guarantee the policyholder payout within 48 hours of death. This is because the money is needed urgently to cater for funeral arrangements and the burial or cremation process.
With Life insurance the claims take longer to process depending on the cause of death.
Though there are policies that offer a higher amount, a typical funeral cover will pay out a maximum of R60,000 when death occurs. The aim is to have enough money to accord the deceased a dignified send-off.
But the amount paid out from a life insurance policy will tend to be higher as it is meant to sustain a household after the death of its breadwinner.
The payout for the life insurance policy will be determined by the need to cater for the family’s needs and lifestyle as at present, besides the policy owner’s budget.
The compensation figure for the life cover is tailored individually with these items in mind thus no fixed figure is offered by the insurer.
Is funeral insurance sufficient cover – it depends on the policy
The extra benefits for life insurance and funeral cover differ according to the main purpose of the policy.
For Life Insurance
For life insurance you will have extras such as disability cover which pays the insured a lump sum in case they suffer an injury or condition that leads to disability.The money can be used for treatment and modifications to home and vehicle to ease movement.
Income protection comes into play in the event that the insured is no longer able to work because of a debilitating illness or disability. It ensures they receive an amount of money every month.
With Funeral Cover
With funeral cover the add-ons are geared towards the costs brought about by death. For instance the double accident benefit will pay the insured or the policy’s beneficiaries twice the payout amount if they, their spouse or a dependent dies from an accident.
The paid-up benefit enables the spouse and the dependents of the policy owner to continue enjoying the cover after the death of the policyholder.
Basically there are benefits in both schemes
There are a number of the extra benefits attached to the two kinds of insurance policies.
For some life insurance covers there is a PayBack feature that gives a payout to the owner of an active policy of a percentage of the premiums they have contributed.
With funeral policies if you have not claimed for a specified number of years you may be eligible for a lump sum payment.
So if you ask yourself is funeral insurance sufficient cover we can see that life insurance and funeral cover have different roles in the financial security of a family. The smart money therefore says go for both.
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All info was correct at time of publishing